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2009 (8) TMI 557

..... k in trade of R which was amalgamated with the petitioner. The assessing officer issued a notice under section 154. The proceeding for rectification were dropped later. Subsequently, a notice for reassessment was issued for the same reasons. Held that- (i) the writ petition was maintainable. Moreover in this case, where the writ petition had been entertained and kept pending for about six years and directions issued for filing of affidavits, the court was not inclined to decline relief only on the ground of existence of an alternative remedy. (ii) the reassessment notice issued virtually the same reason for which rectification proceedings had earlier been initiated but dropped. The Assessing officer had not disclosed any new material for reopening the assessment. The notice for the assessment was not valid and was liable to be quashed. - 2139 of 2003 - 28-8-2009 - MS. INDIRA BANERJEE J. Dr. D. Pal, Abhratosh Majumdar and Ananda Sen for the petitioner. Dipak Shome and P. K. Bhoumick for the respondents. JUDGMENT 1. Ms. IND BANERJEE J. - In this writ application, the petitioner has, inter alia, challenged a notice dated August 28, 2003, issued to the petitioner by the Assessing Offic .....

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..... en opening and closing stock, at the end of the accounting year was not deductible. (ii) Deduction of Rs. 25.97 lakhs towards sales tax liability was inadmissible. (iii) Taxable income of Rs. 30 lakhs was suppressed by inadmissible debits in the profit and loss account. (iv) The reduction in income of Rs. 327.38 lakhs, on account of the alleged change in the accounting policy was liable to be disallowed. 10. By a letter dated July 28, 2003, the petitioner submitted a detailed reply to the rectification notice dated December 24, 2002, dealing with all the allegations/contentions therein. 11. The Assessing Officer did not pass any order under section 154 of the Income-tax Act and the proceedings for rectification were dropped. In other words, the Assessing Officer, after considering the submissions of the petitioner, in the reply to the show cause, was of the view that rectification of the assessment order was not called for. 12. However, the same officer issued the impugned notice dated August 28, 2003, under section148 of the Income-tax Act for reassessment of income for the year in question under section 147 of the said Act, and called upon the petitioner to file a revised return. .....

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..... , could not be allowed. (v) Debit of Rs.194.6 lakhs on account of payment of sales tax in the profit and loss account without corresponding credit of sales tax receipts resulted in excessive deduction and understatement of income, which could not be allowed. (vi) Deduction of Rs.25.97 lakhs credited in the profit and loss account on account of cessation of sales tax liability, could not be allowed, as the contention of the petitioner that the amount had already been disallowed under section 43B in the respective year was incorrect. It is alleged that the said amount of Rs.25.97 lakhs was paid by the assessee and allowed as deduction in the year of payment. (vii) Income of Rs.30 lakhs had escaped assessment by reason of inadmissible debits in the profit and loss account. 17. The petitioner submitted a detailed representation dealing with each of the grounds disclosed by the Assessing Officer for the impugned notice under section 148 of the Income-tax Act. 18. Dr. Debi Prasad Pal appearing on behalf of the petitioner submitted that the grounds disclosed by the respondents were misconceived, against the settled principles of law and no grounds in law for reopening assessment. 19. As p .....

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..... ection 80-IA being disallowable, Dr. Pal pointed out that the method ofallocation of expenses for computation of the income of the Pondicherry unit during the financial year in question was followed in subsequent years. 26. The issue is now covered by a decision dated October 17, 2006, of the Income-tax Appellate Tribunal, E Bench, Kolkata, in favour of the petitioner in respect of the assessment year 2000-01. 27. The Tribunal, inter alia, held as follows: On going through the basis of allocation of the said common head office and selling expenses adopted by the assessee consistently from the assessment year 1998-99, we are of the considered view that the said basis adopted by the assessee for allocation of common expenses is a reasonable and scientific basis and does not call for any modification. The basis accepted by the Assessing Officer is arbitrary as he has not stated the reason for rejection of the assessee s method, he has not stated how he arrived at 20 per cent. for allocating common head office expenses which shows he has taken an ad hoc figure and we accept that profit ratio cannot be applied consistently in all years. Moreover, in addition to the audited accounts of t .....

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..... owed. 30. As pointed out by Dr. Pal, the Department did not appeal against the aforesaid orders of the Income-tax Appellate Tribunal referred to above, which have assumed finality. In view of the categorical finding of the Income-tax Appellate Tribunal that the allocation of common expenses for the assessment year 1998-99 was reasonable and scientific, it is not open to the Department to open reassessment on the ground of the income of the Pondicherry unit having been inflated by manipulation in allocation of expenses. The decision of the Tribunal is binding on the Department. 31. The fourth ground disclosed by the Assessing Officer for reopening assessment, that the petitioner had claimed deduction under section 80-O of 50 per cent. of the gross income in convertible foreign exchange, without deduction of expenses was categorically denied by the petitioner in its reply to the impugned notice. Dr. Pal pointed out that the categorical assertion of the petitioner that it had claimed deduction of only net income in convertible exchange, computed by exclusion of expenses in accordance with the decision of this court in CIT v. M. N. Dastur and Co. P. Ltd. reported in [2000] 243 ITR 10 ( .....

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..... he facts and circumstances of the case. 39. In cases of apparent mistake resulting in escapement, the Assessing Officer could invoke section 154. In cases of mere mistake resulting in assessment, which was not apparent from record, the Assessing Officer might reopen assessment under section 147. 40. The court, inter alia, held as follows (pages 791 and 792): Mistake apparent from the record which has the effect of enhancing assessment ought to be rectified by resorting to this special and speedy procedure when in the view of the Assessing Officer it is unnecessary to resort to reopening of the assessment. In the field of chargeable income escaping assessment, however, section 147 is very widely worded and would include even escapement due to any mistake in the assessment order. But, when even according to the Assessing Officer himself there is a mistake, apparent from the record as it exists, committed in the order of assessment, which is rectifiable on the basis of the existing record under section 154 being a special provision made for the purpose, and that there is no need to resort to reopening of the assessment as contemplated by section 148 read with section 147 of the Act, t .....

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..... sessing Officer who had chosen to resort to section 154 to demonstrate why he is now for the same purpose resorting to section 147. There has to be some compelling reason in such a case for him still to believe that the income that was the subject-matter of rectification has escaped assessment though that was not due to any obvious mistake borne out from the existing record, which could be rectified under section 154. . . . It will not be open to the Assessing Officer to arbitrarily or wantonly resort to the provisions of section 147 where the process of rectification under sec tion 154 fails on the merits. 41. As argued on behalf of the respondents, the Assessing Officer has jurisdiction under section 148 of the Income-tax Act to issue notice of reassessment, upon reason to believe that any income chargeable to tax has escaped assessment. 42. However, if the Assessing Officer is of the view that income has escaped assessment by reason of a mistake apparent from records, and takes recourse to section 154, but finds later, that there is no apparent mistake, then he cannot, in the absence of any other ground on the basis of which he still has reason to believe that the income has esc .....

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..... lows (page 207 and 208): The existence of such alternative remedy is not however always a sufficient reason for refusing a party quick relief by a writ or order prohibiting an authority acting without jurisdiction from continuing such action. In the present case, the company contends that the conditions precedent for the assumption of jurisdiction under section 34 were not satisfied and came to the court at the earliest opportunity. There is nothing in its conduct which would justify the refusal or proper relief under article 226. When the Constitution confers on the High Courts the power to give relief it becomes the duty of the courts to give such relief in fit cases and the courts would be failing to perform their duty if relief is refused without adequate reasons. 48. Moreover, in this case, where the writ petition had been entertained and kept pending for about six years and directions issued for filing of affidavits, this court is not inclined to decline relief only on the ground of existence of an alternative remedy of fifing an objection before the Assessing Officer and then taking recourse to an appeal upon reassessment. 49. In Raymond Woollen Mills Ltd. v. ITO reported in .....

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